Tuesday, August 26, 2008

Pressure on the Federal Government to boost taxpayer support for the car industry has intensified, with Ford yesterday declaring it would need additional aid to remain competitive beyond 2010.

Days after The Age revealed that Ford would cut hundreds of jobs in Victoria due to falling sales of locally built cars, the company's international chief executive and president, Alan Mulally, has met Prime Minister Kevin Rudd and Industry Minister Kim Carr to press his case for more government support.

In a 45-minute meeting later described by a Ford spokesman as "very positive", Mr Mulally is believed to have told Mr Rudd that any move to halve the tariff on imported cars, as recommended by the Bracks review of the car industry, would present difficulties for Ford and necessitate additional "transitional assistance"...
"There was discussion about the fact that the market has become increasingly competitive and that for us to be able to continue to maintain our level of competitiveness in Australia we need to work with the Government on future transitional assistance programs," the spokesman said.

Ford made no explicit threat to further wind down its Australian operations during the talks, instead stressing the commitment it had already made.

"Mr Mulally reiterated the significant investment that Ford has made in Australia over the past 82-plus years, including recent significant investment such as the development of the all-new Falcon and the fact that Australia is the global engineering lead of the corporation's next global light pick-up truck," the spokesman said.

"That re-emphasised our commitment to Australia and that it is an ongoing commitment," he said.

Neither Mr Rudd nor Mr Carr made any comment after the talks, and the Government has yet to endorse the Bracks Committee's recommendations.

Ford's push for more assistance comes after it confirmed on Friday that it would cut 350 jobs at its Geelong and Broadmeadows plants, due to sluggish sales of its locally built six-cylinder models.

The proposed cut in the car tariff came under attack last week from two economists, who argued that the Productivity Commission had made a mistake in claiming that the cuts would boost Australia's economic welfare by $500 million.

The creator of the economic model used by the commission, Professor Peter Dixon of Monash University, said the mistake had "created $400 million out of thin air".

"This isn't a debate about interpretation. It's an error by the Productivity Commission," Professor Dixon said.

The vehicle secretary of the Australian Manufacturing Workers Union, Ian Jones, said that regardless of the debate about tariffs, car makers such as Ford needed help over the next 18 months as they moved to shift production to newer, smaller cars. Ford will start local production of the smaller Focus in 2011.

"They need that assistance to get them through," Mr Jones said. That help could come through measures such as cash incentives or interest-free loans.

The next year-and-a-half would be about "managing decline" as the large car market suffers from higher fuel prices and a sluggish economy.